Requirements There was a minor panic on the local market yesterday morning, and by noon the situation was still obscute. Questioned on the causes of ihe panic, a local banker stated tha! ihe large foreign banks in Shanghai had been supporting the Chinese dollar up to last Saturday, but unfortunately the allotment made by the Central Bank was not sufficiently large to meet local requirements. In consequence of this, a "black market" was set up, in which rates were quoted at more than one penny below those at which the large foreign banks were selling.
The situation became untenable when the large foreign banks yesterday morning dropped their counter rales to one shilling and 24%d. for the U.S$. At the opening, the market became very weak, but some selling by the large foreign banks and a certain amount of support from Hongkong caused the market to become steadier, although at the close there were buyers at 11%d.,. selling rates being quoted at 1ly; d. The situation was still vague at the close, and depended almost entirely upon the allotments which will be made next Friday from Hongkong, Erratic Tendency Temporary The erratic feeling which prevailed in the exchange market yesterday will be only temporary, according to a Chinese banker holding an important position in a commercial banking institution.
Three kinds of quotations of foreign exchange were actually in existence yesterday, he pointed out, They consisted of the official rates of the Central Bank of Chi a, the rates on the exchange market, and the ones on what has been popularly called "the black market", The principle of supply and de-nand, which governs all markets, also exerted its influence on the exchange market, according to the banker.
Following the promulgation of the new exchange rulings, the local market has experienced a shortage of foreign currency, he said. In face of large demands, the market became erratic.
The quota of foreign exchange given to Shanghai by the Chinese], authorities, in his "opinion. generous.
The demands for foreign Currency soon after the restrictions imposed by the Ministry of Finance were naturally high. These were expected to fall off quickly to a level When the present quota would prove to be more than it was required here.
Referring to the new exchange rulings, the banker said the hands of the Chinese authorities were forced by a scheme to raid the market with legal tender notes, which had been accumulated in the north and brought to Shanghai.
Text read from the printed page and cleaned; old type leaves the occasional error.